[brownsfan019]

Well Pivot, I guess this is a discussion for you, Mark and myself.

Here's a brief update on my use of WRB's - as shown in previous examples here, the WRB's are great exit points in my opinion. Here's the downside to how I was using them - exiting all at one point then can lead to over-trading, which has lead to getting into a new position at the low/high of a move and taking a full stop.

In other words, trade #1 would be a winner with a full amount of contracts. Trade #2 could end up being a full losing trade on a full amount of contracts. The overall result was positive, but not as much as I wanted.

So I made a conscious decision - I know exiting is more of an art than a science. No way around that.

In order to prevent over-trading and/or taking full losses, 1/2 of my position is exited at a level and the remaining 1/2 is trailed based on candles and/or WRB's. By doing so, I captured some much bigger moves this week when we had some nice volatility and it did not put me into losing trades. The catch of course is that when it pops in my direction briefly and then retraces, the trailing 1/2 is getting out around break-even. But, that was a conscious decision I had to make. Taking smaller wins on smaller moves and taking larger gains on larger moves is what it came down to. It also reduces commission costs as well.

[BlowFish]

Ok forgive me for being contrary here but I can't see the reason for exiting on a WRB. Quite the revere - price has just made a move and its at the highest/lowest point in that move (give or take a tick or two). If the momentum is still there why not stick with it? If the move is ending the chances are he next bar will be a hammer or doji. BTW I dont look at candles per se (just the price action behind them) but it is fairly rare to get a long white candle followed by a long black one. (A sliding window is it called? or maybe scissors, too lazy to look it up). Essentialy its an upthrust but over the course of two bars.

I can see where you are coming from from a discipline point of view. Also I know some people trade from quite high time frame charts compared to there holding period i.e. they look to enter and exit within the course of one or two bars. (actually I am prone to do that but that is an emotional issue in my case!)

Actually maybe I should try exiting on a WRB I tend to exit just before the big move bar which of course is even worse!!! Holding on to winners is stil something I often have issues with,

Cheers,
Nick.

[walterw]

Originally Posted by PivotProfiler »

Hello BF and others;

I was going to post this in the VSA thread, but while looking at it I got an idea that may appeal to some.

To be sure, this is a "perfect" example, and admittedly, that is probably why I noticed it. This version combines the variations used by BrownsFan, myself and NihabaAshi.

I do think it is more appropriate for time based charts, but BF will be able to say more about that. What you would do is take the trade on one timeframe. After the appearance of the first WRB on that timeframe, move your stop to just below the low of the WRB's body. This is a long trade so we are talking about a white WRB and thus the stop is moved to just below the OPEN of the WRB. Just below would be 1 or 2 ticks.

At that point, you move up to a higher timeframe. Here I have a 30 min chart. So we have moved up from the 5 to the 30. One would not have to move 3 timeframes up, but I was looking at this chart. Moreover, the amount one moves up would be based on the individual preferences and the price action which caused the trade in the first place. In other words, with certain types of news releases one might want to move up from 5 to 30, where the usual move might just be up to 15.

At any rate, that is for the trader to decide. If someone likes this idea, hopefully they will post what they end up doing.

Now once you have moved up to the higher timeframe, You look to exit on the close of the first WRB that appears.

Note how in this example, like so many of yours, the WRB gets you out very near the top of the move. What I like about this is it does allow one to get more of what the market is willing to give you, while still having some of that "get out at the first sign of change" mentality.

Just a thought. Hopefully, someone likes it and can provide more insight and examples.

BTW, notice the bar after the WRB. It has Ultra High Volume, almost as much as the WRB (3 ticks less in fact). Its range is much less however, and it closes in the middle of its range: THIS IS A TRANSFER OF OWNERSHIP BAR. The Smart Money is dumping supply onto the market. Note how price starts to move sideways. Also note the No Demand bar.

Hi Pivot : you quote on your chart this " If you Had" entered here... thats something I would like you to expand on HOW do you clearly open positions on that chart.... a WRB candle "after the fact" looks very nice, and that exit criteria has some logic... now the deal is to be on a position previous to that, would apreciate if you expand on that, maybe you can start a new thread on how do you open positions with xx technique.... cheers Walter.

[brownsfan019]

Originally Posted by BlowFish »

Ok forgive me for being contrary here but I can't see the reason for exiting on a WRB. Quite the revere - price has just made a move and its at the highest/lowest point in that move (give or take a tick or two). If the momentum is still there why not stick with it? If the move is ending the chances are he next bar will be a hammer or doji. BTW I dont look at candles per se (just the price action behind them) but it is fairly rare to get a long white candle followed by a long black one. (A sliding window is it called? or maybe scissors, too lazy to look it up). Essentialy its an upthrust but over the course of two bars.

I can see where you are coming from from a discipline point of view. Also I know some people trade from quite high time frame charts compared to there holding period i.e. they look to enter and exit within the course of one or two bars. (actually I am prone to do that but that is an emotional issue in my case!)

Actually maybe I should try exiting on a WRB I tend to exit just before the big move bar which of course is even worse!!! Holding on to winners is stil something I often have issues with,

Cheers,
Nick.

Nick - great points. I know what you mean. At first, I thought the same thing as well regarding exiting on the WRB, but watch them in real time and see how they look on your charts for exits. I mentioned this before, but I view the WRB as a temporary imbalance between the bulls and bears which will sooner or later be 'corrected'.

I have found that WRB's on a VBC are powerful simply b/c the chart itself is comprised of volume and volume only. For a WRB to appear, some serious volume has to come thru; whereas a time chart may be different. I don't know as I don't use time charts anymore.

It's worth looking at if nothing else in your own trading to see if there's something there that was staring you in the eyes all along...

[walterw]

Originally Posted by brownsfan019 »

Quick question for those that have read the thread - has anyone else looked at and/or implemented WRB's into their trading? Not sure how much more to really talk about from my point of view. I can post the occasional chart, but I think you guys get the idea if you read my posts.

Just wondering if anyone else is using the methodology.

Brown : I do trade this concept discounted in a diferent presentation... what I never understand is how do you OPEN your trades in this method....

[brownsfan019]

Originally Posted by walterw »

Brown : I do trade this concept discounted in a diferent presentation... what I never understand is how do you OPEN your trades in this method....

walter - good question. I do not use WRB's for entries at all, just exits. Maybe Pivot can help there.

[Anonymous]

WOW fellas, it's as if you can read my mind. I was just about to make this post.

WRBs & Long Shadows contain so much information. They exploit:

* Supply and Demand
* Support and Resistance
* Volume
* Volatility
* Trends

While BrownsFans uses them as a means of exiting a position, and there is nothing wrong with that, they offer the trader much more. In fact, it is a bit ironic that they are used for Exists when they may be more powerful when used as part of Entries.

For this example, I am using VSA as the basis of entry. That is, here I am not showing a Candlestick pattern (price action pattern) per se.

First, this is a beautiful example and shows the power of the concepts being discussed. I did seek out a good chart, so this is after the fact as I do not trade this market. With that said, the ideas are valid and can be seen time and time again.

The chart on the right is the large view. The area within the square is the chart on the left.

One thing we must understand about WRBs & Long Shadows is they represent possible shifts/changes in the Supply/Demand dynamics in the market. Long Shadows in particular also represent PRICE REJECTION.

The first thing to note is we have a Wide Spread Down Bar on Ultra High Volume that closes off its lows and with the next bar up. Clearly, for the next bar to be up, there had to be some buying (demand) on the first bar. The Long Shadow tells us that price moved down and then was rejected by the market. In other words, demand swamped supply as price reached that level. Moving price back up.

Price does move up a bit and then we have No Demand. Professional Money is not yet interested in higher prices. This makes sense. With all the Volume on the climatic action bar (Long Shadow candle) there could still be more supply in the market. So the Smart Money would like to see price go back down and test for that Supply.

Notice that the bar right after the No Demand is a WRB. Very often the bar after or the bar two bars after a low volume bar will be a WRB. This is because low volatility (as seen thru low volume and narrow bars) proceeds periods of high volatility.

Now we get another larger WRB with very high volume. Again here the next bar is up telling us that there was some buying in the bar. WRB analysis also tells us that supply/demand is shifting. WRBs also create areas, or zones, of support and resistance.

So here is the rub. The best entry signals occur within the body of a WRB or the shadow of a Long Shadow candle. But that makes sense as these are the areas where a shift has taken place. Note that we get a narrow range bar that closes near its middle on volume less than the previous two bars: No Supply. The next bar is up thus confirming the No Supply and this is entry point #1.

This is an advanced idea, so pay attention :

The No Supply bar itself formed within the shadow of the Long Shadow where price has already been rejected by the market. The prudent thing to do, therefore, would be to go long. This No Supply also forms within the body of the WRB, where we know the supply/demand dynamics changed. And from a VSA perspective, we have moved back into the lower range of an Ultra High Volume candle, and volume has dried up.

So the buy signal was set-up by the appearance of both the Long Shadow and the WRB.

Also note that while one candle does trade a bit lower than the low of the Long Shadow, neither the WRB nor the No Supply candles does.

Entry #2 comes after the Test candle is confirmed by the next candle being up. Here again we see that the set-up begins with an Ultra Wide Spread bar or white (close>open) WRB. Because the next bar is down, we know that some of the volume on the bar was from supply entering the market. VSA also tells us that markets do not like wide spread bars with high or ultra high volume. Interestingly enough we also get another Long Shadow three bars later. The situation is reversed here. The test candle trades a bit lower than the shadow of the Long Shadow candle, but not lower than the WRB's body.

Again, we are alerted to look for entries as the WRB and Long Shadow show up on the chart.

Lastly, we have entry #3. This time we get a WRB. It is an up candle with Ultra High Volume-the kind of candle the market does not like. Now look at the next bar. It closes down from the WRB's close, has a narrow range, closes on its low and has volume less than the previous two candles. This is No Selling pressure. Next bar closes higher. Enter on close of this candle or open of next.

And what happens next? We get the Largest WRB of them all as the market takes off..........

Optimal entry is #1. Not because it offers the most profit, but because of the pattern involved: demand entered, No Demand sign, No Supply/Test.

btw, the Long Shadow candle is a WRB also and the No Demand is within the range of the body.

We want to look for certain types of price action clues or set-ups within the bodies of WRBs and or the Shadows of Long Shadows. If you use, an oscillator, you want an overbought or oversold reading to occur when price is in these areas. Even though overbought and oversold condition do not really exist, but that's for another thread.

[Anonymous]

Same chart but with a twist.

I do not use indicators, but here I have attached a MACD Histogram with default settings.

Notice that there is a divergence signal in the area we would most like to see it: the body of a WRB and the shadow of a Long Shadow.

So we have one entry option.

Even if one waited for the histogram to go above the line, the entry still comes within the body of the WRB and the shadow of the Long Shadow.

Again, I stress the point that the idea is to take signals in the S/R zones created by the WRBs or Long Shadows. Once in the trade, they can be used to trail a stop or take profits.

Also note that in a perfect situation, price would not trade lower than the low of the Long Shadow. So the divergence would be even more subtle but nonetheless tradable for traders who use such things.